SEC Chairman to Request Budget Boost as Sequestration Looms

The top U.S. securities regulator will urge lawmakers to boost its funding.

WASHINGTON -- The top U.S. securities
regulator will urge lawmakers on Thursday to boost its funding,
saying a failure to increase the budget could hamper its ability
to enforce new rules of the road for Wall Street.

The Securities and Exchange Commission "does not yet have
all the resources necessary to fully implement" the 2010
Dodd-Frank Wall Street reform law, SEC Chair Elisse Walter will
tell the Senate Banking Committee, according to prepared remarks
viewed by Reuters.

"If the SEC does not receive additional resources, I believe
that many of the issues to which the Dodd-Frank Act is directed
will not be adequately addressed," she added.

The SEC and other financial regulators in recent years have
been denied big budget boosts despite broad expansion of their
responsibilities after the 2007-2009 financial crisis. Republican lawmakers in particular have stood in the way of
funding hikes, using Congress' appropriation authority to hinder
stricter supervision of financial markets.

The SEC's latest plea for more money comes as federal
agencies, including the SEC, face a budget cut due to
"sequestration" -- automatic across-the-board spending cuts put
in place as part of a larger congressional budget fight. They
are due to kick in March 1 unless lawmakers agree to an
alternative. Walter does not explicitly mention concerns about
sequestration in her prepared testimony, but the SEC and several
other regulators that are slated to testify on Thursday could
face questions about it during the hearing.

In preliminary estimates last year of how sequestration
would affect each government agency, the White House's Office of
Management and Budget said the SEC's $1.321-billion budget could
face a cut of $108 million.

The Commodity Futures Trading Commission is also slated for
a $17 million cut, while the Consumer Financial Protection
Bureau faces a $34 million cut, according to the OMB document. Both the SEC and CFTC have their budgets appropriated by
Congress, though the SEC's is deficit neutral because the monies
are matched through industry transaction fees.

The CFPB is a government regulator that is funded by the
Federal Reserve and does not receive congressional
appropriations. Nevertheless, it is still on the sequestration chopping
block along with some other non-government, industry-funded
organizations like the Public Company Accounting Oversight Board
and the Securities Investor Protection Corp.

The head of the PCAOB told reporters on Wednesday that the
federal government is wrong to target his non-profit corporation
for sequestration and said the PCAOB may consider asking for a
legal review of the matter from the Justice Department. An OMB official said Wednesday that the sequestration law
reduces budget resources in all accounts unless they are
exempted. The CFPB, PCAOB and SIPC's accounts were not granted
an exemption, and the PCAOB and SIPC have funds available
through federal laws. That means their accounts can be
sequestered, the official said.

RADIO SILENCE FROM REGULATORS

Walter said in her prepared testimony that President Barack
Obama's fiscal 2013 budget request of $1.566 billion for the SEC
could help hire 676 new staff to help carry out exams and
investigate wrongdoing. The agency also needs the money, she
added, for technology upgrades.

The SEC, CFTC and CFPB have all remained silent on how they
are preparing in the event sequestration occurs, though Walter
did say on Wednesday the agency is ready to work with the PCAOB
if it is affected. The SEC denied a Freedom of Information Act request by
Reuters in November 2012 for its for sequestration contingency
plans, saying it was withholding a document because it was
"predecisional" in nature and exempt from public disclosure
under the FOIA law.

A similar request made to the CFTC also came up empty, with
the agency telling Reuters it had no responsive documents. The CFPB on Wednesday declined to comment, saying it would
be premature because of ongoing discussions by Congress to avert
the cuts.

Spokesmen for the CFTC and SEC also declined to discuss how
they might deal with sequestration if it comes to fruition.